Why the 10:1 cuts-to-revenue-increases question is a policy non-sequitur

posted at 12:45 pm on August 19, 2011 by Ed Morrissey

Call this The Debate Question That Would Not Die. Eight days ago in Ames, Iowa, Fox News’ Bret Baier asked the Republican candidates whether they would walk away from a debt deal that provided a 10-1 ratio in real cuts to revenue increases. Every one of the GOP hopefuls raised their hands to a burst of applause, and to enduring criticism over the unreasonableness of conservatives in the Tea Party era:

None of the candidates got much of a chance to explain their non-verbal responses, but the answer is that this question is a political non-sequitur. We could pass a deal that had a 100:1 ratio of cuts and increases and it would still not address the reason why the US is rapidly expanding its debt, and why we are headed for a fiscal trainwreck within a generation.

Budget cuts in the context of the debt debate and the upcoming joint select committee deliberations have focused entirely on discretionary spending. In fact, there is technically no such thing as a “budget cut” anywhere outside of discretionary spending. Entitlement spending is set by law; the numbers that appear in the federal budget plans for debt service, Medicare, Social Security, Medicaid, the Indian Health Service, and other statutory programs are not budgeted funds but estimates. Checks get cut for these programs by statute, not by Congressional appropriation. In order to “cut” funding in these areas, Congress would have to change the laws, not cut the budget appropriations.

Currently, we’re running a deficit of around $1.6 trillion annually. Our entire discretionary-spending budget comes to around $1.3 trillion — and that includes services like our military, homeland security, and so on. Even if we cut every last dollar out of discretionary spending by essentially firing everyone that works for the federal government and disbanding our military around the world, we would still have to borrow $300 billion or more each year.

And that’s just at the present. Let’s look again at the coming liabilities we face from our entitlement program promises, as set by current law:

The problem will shortly become more severe, and rapidly worsen over the next 40 years. If we were to attempt to solve this through revenue increases, we would have to impose a far more confiscatory tax policy, perhaps seizing up to 40% of production by 2040. The only problem with that idea is that the more confiscatory the policy becomes, the more production decreases as capital for investments disappears from the private sector, either through the seizure itself or from flight. That would force the government to increase the confiscatory nature of its tax policies, which would drag production down even further, and so on. It becomes a vicious circle of economic collapse.

There is only one solution to the long- and short-term crises facing the US on debt: entitlement reform. We have to change these programs in significant ways in order to drastically reduce our future liabilities and provide a rational basis for keeping some safety-net programs in place — or eliminate them altogether, which is what will happen in the end if we do nothing and have no money to fund them. That’s why the question of accepting 10:1 cuts to revenues is the political equivalent of “Have you stopped beating your wife?” Accepting the context of the question itself is the real error.

Update: Let me make clear that I am addressing this in the context of the debate, which was in term of the debt deal. Kevin Glass rightly says on Twitter that entitlement reform can be considered “budget cuts.” However, nothing I’ve seem about the joint select committee gives any indication that they’re looking at anything other than the discretionary side of the ledger. If we got a 10:1 deal on actual reductions in entitlement liabilities to revenue increases, I would take that deal — as long as we’re talking actual reductions in those liabilities, and not just a reduction in the rate of increase.

Blowback

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Might a 10:1 ratio not be a bad benchmark to work from, though? I mean, we could find ways to close loopholes and limit deductions in a way that would disproportionately affect liberal elites and scare up an extra $100 billion in revenue. Then the GOP could claim to be “compromising” with Obama and being “reasonable,” all the while demanding a $1 trillion dollar deficit reduction.

Why aren,t Obama’s poll numbers falling through the floor? Today, he is at 45% in Rasmussen’s daily poll of likly voters. I would think that a liberal like Obama should be more prone to dropping faster and farther in the polls than a conservative politician given that liberals make up only 20% of the population, while conservatives and independents make up the other 80% in roughly equal parts.

And yet, Obama’s approval rating is still at 45%, which is within striking distance for him to win re-election in 2012, desite the current state of the economy. How can this be? I am really curious?

Hey Ed: Do you have anything that will explain why Obama is still at 45% in Rasmussen despite the current state of the economy? Carter was, I believe, at 33% in Gallop at this stage of his Presidency. I just cannot understand why he is not below 40%…

Given we’re already being forced to take, depending on one’s scoring of the end of the Bush/Obama tax rates and “indexing” of the Alternate Minimum Tax, a 2:3 to 1:2 ratio of reductions-in-planned-spending (no, not spending cuts) to tax increases (over current policy-extended), I don’t care if the touted future increase is 100,000:1 – it’s too much taxation.

I’ll take the 10:1 deal if, and only if, the cuts preceed the tax increases. In other words, for every $10 in spending cut this year, you can have $1 in tax increases next year. Not the other way around because we have proven that if you do the tax increases first, the cuts NEVER, EVER occur.

Hey Ed: Do you have anything that will explain why Obama is still at 45% in Rasmussen despite the current state of the economy? Carter was, I believe, at 33% in Gallop at this stage of his Presidency. I just cannot understand why he is not below 40%…

If we got a 10:1 deal on actual reductions in entitlement liabilities to revenue increases, I would take that deal — as long as we’re talking actual reductions in those liabilities, and not just a reduction in the rate of increase.

Better make sure those cuts are signed into legislation changing the way those “entitlements” work, otherwise they’ll just be more fairy tale BS that never actually occur.

If someone proposed spending $2.7 trillion in 2013, and collecting $2.2 trillion, I’m game. Now which Republican is going to be smart enough to throw that back in 0bama’s face? Which Republican will actually submit that plan for a vote?

Not good enough. Since I am still waiting for the 3 dollars in cuts for the 1 dollar in tax increases promised Reagan with he signed the Tax Hike circa 1982. I want payback, at least 29 years of decreases then we can discuss the revenue hikes.

Nothing like a true believer. What facts exist that we would actually get the spending cuts. 29 years and counting and still waiting for the last promised spending Cuts under Reagan. Meanwhile 3 tax hikes and 1 tax cut later we are nearly 16 trillion dollars deeper in debt and wait for it: still no spending cuts.

First is Helvering v. Davis (1937), which establishes that the FICA is a tax that is not earmarked. It goes into the general funds. Congress may pay out benefits to individuals. These are two separate activities, they are not linked. No one has an ‘account’ because the government cannot hold the money as a trustee. Funds go into the general funds.

Second is Flemming v. Nestor (1960) which finds that SSA is NOT a contract of the individual with Congress and Congress is under no obligation to pay out SSA benefits.

Thus Congress has the discretion to pay out benefits and no requirement to do so. SSA is not mandatory but discretionary spending. Yes people are addicted to it, but that in no way, shape or form makes it mandatory spending. All ‘entitlements’ are at the discretion of Congress as they are not mandated by the US Constitution but nice programs trying to address the general welfare. We did without them for over a century and can do without them again by the will of Congress to stop paying out on them. No Congress can make law to compel a future Congress to spend money on anything. Congress has the sovereign power of the purse, and that starts with the US House. If the House decides not to fund something that is discretionary, it does not get funded.

Ed, if the taxes are “today” and the cuts are promises walking away is the only sensible response.

If the cuts are today and the taxes come only if the economy overheats, yeah, I’d go for it.

If the cuts are today and the taxes are today, meaning next year’s budget conditional upon BOTH being in the budget together, I would probably pinch my nose and let it go through.

If they were “tomorrow” things – not a chance. I’d walk away from even 100:1.

We Never See Promised Cuts. And one other note about the cuts mentioned above, I am speaking about cuts based on this year’s budget that amount to $1 trillion or more for the 2012 budget. Then I would allow a $100 billion tax increase. The cuts would, of necessity, weaken Federal agencies that are out of control, and hopefully leave them as a footnote in history. The weakened Federal bureaucracy would spur business more than simple tax decreases that can go away next year.

Before I am happy with any cuts package I want to see masses of Federal employees out on the unemployment lines.